RMB Capital Loan Agreement
Exhibit
10.17
Contract
No: LD2008119
Loan
type: Industry liquid capital
the
Borrower (Party A): Danyang Lihua Electron Co., Ltd.
Address:
Danyang City Hougang County Five Star Industry Development District
Postal
Code: 212312
Legal
Person: Xxxxxxx Xxx
Tel:
00000000
the
Lender (Party B): China Construction Bank, Danyang Branch
Address:
1Yunyang Road, Dangyang City
Postal
Code: 212300
Legal
person: Xxxxxxx Xxxxx
Tel:
00000000
Party
A
applies to borrow from Party B, and Party B agrees to loan the capital to Party
A. According to the relevant laws and regulations, the parties reach the
following agreement through negotiations. The parties memorializes the
contact so that they both abide by its terms.
Clause
1 Loan Amount
Party
A
borrows RMB FOUR MILLION (4,000,000) from Party B
Clause
2 Use of Proceeds
Party
A
will use the loan for manufacture cash flow. Party A shall not change the use
of
the loan without written permission from Party B.
Clause
3 Term of the Loan
The
term
of the loan is 12 months, from 4/30/2008 to 4/29/2009.
If
the
loan effective date under this contract does not agree with the loan deposit
certificate, the effective date shall be the date on the loan deposit
certificate, and the due date shall be adjusted accordingly.
The
Loan
deposit certificate is incorporated into and part of the contract. It has the
same legal effect as this contract.
Clause
4 Loan Interest Rate, Penalty Rate and the Calculation and Payment of
Interest
1.
Loan
Interest Rate
The
interest rate of the loan under this contract is APY. For this loan, it is
the
third
category
below:
i)
Fixed
rate, which means the rate stays the same during the term of the
loan;
ii)
Fixed
rate, which means the Base Rate plus or minus certain percentage, and the rate
stays the same during the term of the loan;
iii)
Floating rate, the Base Rate of the Interest Starting Date plus 10%. The rate
is
adjusted every six months according to that date’s Base Rate plus 10% during the
period from the Interest Starting Date to the date when the principal and
interest of the loan are paid off. Rate Adjusting Date is the corresponding
date
of the Interest Starting Date in the adjusting month. If there is not
corresponding date in the rate adjusting month, then the last date of the
adjusting month shall be the Rate Adjusting Date.
2.
Penalty Rate
1)
If
Party A does not use the loan as specified in this contract, the Penalty Rate
will be Loan Interest Rate plus 100%. If the Loan Interest Rate were to be
adjusted according to Clause 4.1(iii), the Penalty Rate will be adjusted
according to the adjusted Loan Interest Rate and the above upward
adjustment.
2)
If the
loan is not paid off on time, then the Penalty Rate is the Loan Interest Rate
plus 50%. If Loan Interest Rate were to be adjusted according to Clause
4.1(iii), the Penalty Rate will be adjusted according to the adjusted Loan
Interest Rate and the above upward adjustment.
3)
If the
loan is not used as specified in the contract and the loan is not paid off
on
time, the Penalty Rate should be the higher one and interest is compounding.
3.
The
Interest Starting Date shall be the date when the loan is transferred to Party
A’s bank account. When the loan is disbursed, the Base Rate is the rate
published by China People’s Bank for loans of the same terms and category on the
Interest Starting Date. After that, when the Loan Interest Rate is adjusted
according to the above conditions, the Base Rate is the rate published by China
People’s Bank for loans of same term and category on the Rate Adjusting Date. If
China People’s Bank no longer publishes rates for loans with the same period and
same category, the Base Rate shall be set according to the rate for loans of
the
same term and category and which is commonly accepted by the banking industry
on
the Rate Adjusting Date, except that parties may have other arrangement in
relation thereto.
4.
The
calculation of loan interest starts when the loan is transferred to a bank
account designated by Party A. The interest is calculated daily; daily interest
is annual interest divided by 360. If Party A cannot pay interest on the
interest payment date, then the interest starts to compound the next
day.
5.
Payment of interest
1)
For
the fixed rate loan, when calculating the interest, the interest shall be
calculated according to the rate agreed. For the float rate loan, the interest
shall be calculated according to the rate set for that floating period. If
there
are multiple changes of rate in one interest payment period, the total interest
shall be the sum of the interests of all the floating periods.
2)
The
payment of interest is monthly, and the payment date is the 20th
day of
each month.
Clause
5 Distribution and Use of the Loan
1.
The
condition precedents for distribution of the loan
Unless
Party B waives in whole or in part, Party B is obligated to disburse the loan
only when the following conditions are satisfied:
1)
Party
A has obtained all loan-related approvals, registration, insurance, payments
and
other legal procedures;
2)
If
there are collaterals under the contract, the liens on such collaterals shall
meet Party B’s requirements and have been perfected and effective and shall
remain perfected and effective;
3)
Party
A has established a bank account for the service of the loan;
4)
Party
A is not in breach of the contract or causes or permits to exist any event
or
circumstances which may adversely affect the security of Party B’s loan;
5)
There
exist no laws and regulations or other authorities which may prohibit or limit
Party B from making the loan; and
6)
___(left
blank)_____________
2.
Use of
the Loan Proceeds
The
loan
shall be for one time use only.
3.
Party
A shall use the loan according to Clause 5.2. Party A shall not advance, delay
or cancel the withdrawal of the loan, without the written consent of Party
B.
Clause
6 Repayment of the loan
1.
Principles of Repayment
Under
this contract, the repayment by Party A shall be distributed according to the
following order of priority:
Party
B
has the right to use the repayment by Party A to offset Party B’s cost which
Party A should be responsible for under the contract and Party B’s cost in
perfecting its creditor’s rights. The balance shall be repaid according to the
following principle: interest shall be paid prior to principal and interest
shall stop accumulating only when the principal is paid off.
For
loans, the principals of which are not repaid in full 90 days after the maturity
date, or loans, the interests of which are not repaid within 90 days after
the
due date, or other types of loans specified by relevant laws and regulations,
Party A’s repayment funds, after clearing the costs described above, shall be
applied to principal first and then to interest.
2.
Payment of Interest
Party
A
shall pay interest to Party B on Interest Payment Date. The first Interest
Payment Date is the first payment date after the loan is disbursed. The interest
and principal shall be paid off on the last repayment of the loan.
3.
Principal Repayment Plan
The
principal shall be repaid all at once.
4.
The
Method of Repayment
Party
A
shall transfer enough funds to repay the amount due for the current period
to a
bank account set up by Party B before the due date. Party A shall transfer
the
funds to repay the loan (Party B also has the right to repay the loan from such
account), or Party A shall transfer enough funds to repay the loan from other
accounts on the repayment date.
5.
Prepayment of the Loan
If
Party
A wishes to prepay the loan, it shall submit a written application to Party
B
ten days before the prepayment. After the approval of Party B, Party A can
prepay the loan in part or in whole.
If
Party
A prepays the loan, the interest shall be calculated according to the actual
loan term and the Loan Interest Rate agreed in the contract.
If
Party
B permits Party A to prepay the loan, Party B has the right to ask Party A
to
pay compensation, which shall be calculated in the following way:
Compensation
= loan principal prepaid times number of month before the loan due date
times1‰
Clause
7 Party A’s Rights and Obligations
1.
Party
A’s rights
i)
Party
A has the right to ask Party B to disburse the loan according to the
contract;
ii)
Party
A has the right to use the loan proceeds according to the contact;
iii)
Party A has the right to apply for an extension of the loan if it meets the
conditions set by Party B;
iv)
Party
A has the right to ask Party B to keep confidential all the financial data
and
business secrets provided by Party A, except those covered by other laws,
regulations and other authorities or parties agree to otherwise;
v)
Party
A has the right to refuse to pay Party B any bribery and has the right to report
to relevant government agencies any of Party B’s action to demand a bribery and
any Party B’s action which violates relevant law and regulation regarding loan
interest and service fee.
2.
Party
A’s obligation
i)
Party
A shall withdraw funds according to the contract and repay the loan and
interest. Party A shall also pay all the costs according to the
contract.
ii)
Party
A shall provide data on its financial situation and business operations
according to Party B’s requirements, including but not limited to provide last
quarter’s asset balance sheet, income statement within 10 business days of the
first month of every quarter, and annul cash flow chart at the end of the fiscal
year. Party A shall be responsible for the truthfulness, comprehensiveness,
validity of the materials provided. Party A shall not provide false or
misleading information or omit important financial information.
iii)
If
Party A changes its name, legal person, address, scope of business, registered
capital or corporate charter and the changes require Industry and Commerce
registration, Party A shall notify Party B in writing within three business
days
of the change and send Party B all the materials after the change.
iv)
Party
A shall use the loan proceeds according to the contract. Party A shall not
use
the funds for any illegal transaction; shall cooperate with Party B to examine
and supervise the use of the loan proceeds; Party A shall not withdraw the
funds, transfer asset or use related-party transactions to evade its liability
to Party B; Party A shall not use fake contracts with related parties, fake
receipts without any trading background or amount due as collateral in exchange
for capital and credit award from banks.
v)
If
Party A uses the loan proceeds to engage in manufacturing or construction,
it
should obey relevant laws regarding to the environmental
protection.
vi)
Before Party A repays the interest and principal of the loan in full to Party
B,
Party A shall not use the asset purchased with this loan as collateral to any
third party.
vii)
If
Party A is a corporate client, Party A shall report to Party B any transactions
which involve over ten percent of its assets, including:
a)
the
relationship between the transaction parties;
b)
the
project of the transaction and nature of the transaction;
3)
the
transaction amount or its corresponding ratio;
4)
pricing policy (including transactions with no or nominal monetary
values)
viii)
The
loan under this contract is fixed asset loan or project level loan. Party A
shall guarantee that the proposed project has already been approved by the
governmental authority and does not violate any laws or regulations; that
sufficient capital or other funds shall be readily available according to the
contract. Party A shall also guarantee the project will be developed as planned.
Claus
8 Party B’s rights and obligations
1
Party B
has the right to demand Party A to repay the principal, interest and fees on
schedule. Party B can also exercise other rights according to the contract
and
demand Party A to perform its obligations in this contract.
2
Party B
shall disburse the loan proceeds as specified in the contract, except when
any
delay is caused by Party A or when such delay is not due to Party B’s fault.
3.
Party
B should keep confidential all the financial data and business secrets provided
by Party A unless otherwise covered by laws or regulations, or demanded by
governmental authority or parties hereto otherwise agreed.
4.
Party
B shall not bribe Party A or ask and accept any bribery from Party
A.
5.
Party
B shall not be dishonest, and shall not engage in any action which may harm
Party A’s interest.
Clause
9 Event of Default and Make-Good Clause if Party A’s Action Jeopardizes Party
B’s Creditor Rights.
1.
Party
B’s breach and its liability
i)
If
Party B refuses to disburse the loan without valid reason, Party A can demand
Party B to continue to disburse the loan according to the contract;
ii)
If
Party B violates the laws or regulations against the taking of any fees or
interests from Party A, Party A has the right to demand the return of such
fees
or interests.
2.
Situations which cause Party A’s breach
i)
Party
A breaches any covenants in the contract or violates any legal
obligation;
ii)
Party
A clearly repudiates or repudiates with its action the contract.
3.
Situations which jeopardize Party B’s rights as creditor
i)
Any
event or circumstance below which may be deemed by Party B as will jeopardize
its creditor’s rights: contracting, leasing, entrusting, share restructuring,
reduction of registered capital, investment, business alliance, merger,
acquisition, spin-off, joint-venture, (involuntary) filing of halting of
business operation, dissolution, revocation, bankruptcy, change of control
or
major asset sale by controlling shareholder or de facto controller, halt of
business activity, levy of hefty fines by governmental authority , revocation
of
business registration or license, major legal dispute, business in significant
trouble or worsening of financial situation, or when the legal person or major
management personnel cannot perform duty normally.
ii)
Any
event or circumstance below which may be deemed by Party B as will jeopardize
its creditor’s rights: Party A defaults under other loans, including loans made
by China Construction Bank or other third party; Party A conveys its asset
for
little or no consideration; Party A reduces liability owed to it by third
parties or is not diligent in exercising its creditor right, or provides
guaranty for a third party.
iii)
Party A abuses its status as corporation legal person or limited liability
status for shareholder, or is unable to pay its debts, when such action may
be
deemed by Party B as will jeopardize its creditor rights.
iv)
Any
condition precedent for the loan in the contract is not met
continuously.
v)
Any
event or circumstance below of the Guarantor which may be deemed by Party B
as
will jeopardize its creditor’s rights:
a)
Breach
any term in the Guaranty, or any representation or warranty is false, wrong
or
misleading.
b)
contracting, leasing, entrusting, share restructuring, reduction of registered
capital, investment, business alliance, merger, acquisition, spin-off,
joint-venture, (involuntary) filing of halting of business operation,
dissolution, revocation, bankruptcy, change of control or major asset sale
by
controlling shareholder or de facto controller, halt of business activity,
levy
of hefty fines by governmental authority , revocation of business registration
or license, major legal dispute, business in significant trouble or worsening
of
financial situation, when the legal person or major management personnel cannot
perform duty normally, or any other event or circumstance which may adversely
affect the Guarantee.
c)
Any
situation which may cause it unable to guarantee the loan.
vi)
Any
situation below of the pledge or collateral which may be deemed by Party B
as
will jeopardize its creditor rights:
a)
Because of third party’s action, government taking, confiscation, unpaid
recovery, demolition, change of market conditions or any other reasons , the
pledged asset is damaged, lost or its value is diminished.
b)
The
pledged asset is seized, attached, frozen, detained, auctioned, or supervised
by
administrative agencies, or its title is in dispute.
c)
The
Pledgor or Guarantor breaches any terms in the relevant contract or any
representation or warranty is false, wrong or misleading.
d)
Other
situations which may adversely affect Party B’s lien on the pledged assets or
collateral.
vii)Any
event or circumstance below may be deemed by Party B as will jeopardize its
creditor rights: Guaranty is not valid, not effective, invalidated, revoked,
cancelled, the Guarantor breaches the Guaranty, repudiates or repudiates with
action the Guaranty, or the Guarantor loses all or part of his capability to
perform his obligations or the value of the Guaranty is diminished;
or
viii)
Any
other events or circumstances which may be deemed by Party B as will jeopardize
its creditor rights.
4.
Party
B’s Damage Control Measures
Party
B
has the right to take the following one or more actions once any event or
circumstance under Clause 9.2 or Clause 9.3 occur:
i)
Stop
further disbursement of loan proceeds;
ii)
Accelerate the loan and make it due and payable immediately and demand Party
A
to pay all principal, interest and fees.
iii)
If
Party A has not withdrew the loan proceeds as specified in the contract, Party
B
has the right to ask Party A to pay a penalty of 0.1% of the undrawn amount.
Party B also has the right to stop disbursing the remaining balance of the
loan.
iv)
If
Party A does not use the loan proceeds according to the contract, as to the
mis-used portion of the loan, starting from the date of the breach to the end
of
the term, Party B has the right to ask Party A to pay back the funds at the
Penalty Rate as defined in the contract, pay compounding interest and other
interests in one of the ways as defined in the contract.
v)
If the
loan is overdue, as to the overdue portion of the loan, including principal
and
interest (include those principal and interest accelerated by Party B), starting
from the date of the breach to the end of the term, Party B has the right to
ask
Party A to pay back at the Penalty Rate as defined in the contract, pay
compounding interest and other interests in one of the ways as defined in the
contract. The loan is overdue if Party A does not repay it on time or does
not
repay the loan according to the schedule specified in the contract.
Before
the loan is due, Party A shall pay back the overdue interests according to
the
principles set forth in the contract, including pay compounding interest and
other interests in one of the ways as defined in the contract.
vi)
Other
measures to diminish the damage, including but not limited to:
a.
Without prior notice to Party A, withdraw RMB or other currency in equivalent
value from its bank account in China Construction Bank system
b.
Exercise right on the collateral;
c.
Ask
Party A to provide new guarantee which meets the requirements specified in
this
contract;
d.
Cancel
this contract.
Clause
10. Other Terms
1.
Payment of fees:
Except
otherwise agreed to by parties hereto, Party A shall pay the following fees
related to the contract and the collateral/guaranty: attorneys’ costs,
insurance, valuation, registration, safe keeping, and notarization.
Party
A
shall cover all of Party B’s actual costs and expenses to perfect and exercise
its creditor rights (including but not limited to, cost related to litigation,
arbitration, property insurance, travel, execution, evaluation, notarization,
delivery, public notice and legal service. )
2.
The
use of information provided by Party A:
Party
A
agrees that Party B may check Party A’s credit condition with China People’s
Bank or via the credit database established by credit administration authority
under the permission of China People’s Bank, or may inquire related entity and
department about Party A’s credit condition. Party A also agrees that Party B
may furnish Party A’s credit information to the above-mentioned credit database.
Party A also agrees that Party B may reasonably use and disclose Party A’s
information for business purposes.
3.
Public
notice to urge Party A’s repayment of the loan
If
Party
A delays the repayment of the loan or breaches the contract in other ways,
Party
B has the right to notify related entities or departments and has the right
to
make public notice through news media to urge Party A’s repayment of the
loan.
4.
The
effect of Party B’s evidence
Unless
Party A can show reliable and clear evidence to the contrary, Party B’s internal
financial records on principal, interest, fee, repayment, receipts which are
made and kept by Party B on Party A’s withdrawal, repayment of principal and
interest, and record which shows Party B has urged Party A to repay the loan
shall all constitute effective evidence of the creditor-debtor relationship.
Party A shall not raise any objection merely because the above-mentioned record,
receipts and certificates are made and kept by Party B unilaterally.
5.
Reserved Rights
Party
B’s
rights under this contract shall not affect other rights Party B may have
according to laws, regulations or other contracts. Any waiver, extension or
delay to exercise the rights under this contract shall not operate as a waiver
of any rights and interest under this contract or as permission to the default,
hence it shall not limit, prohibit or hinder Party B’s exercise of its rights
under the contract or other any rights it may have and it shall not lead any
obligation and liability on the part of Party B to Party A.
6.
If
Party A has other debts to Part B besides this contract, Party B has the right
to withdraw RMB or other currency with equal value from Party A’s bank account
in China Construction Bank system to pay any debts due. Party A agrees not
to
raise any objections.
7.
Party
A shall notify Party B of any change of mailing address or contact information
in writing as soon as possible. Party A shall cover any losses caused by any
delayed notification.
8.
Transfer of the amount due
As
to all
of the Party A’s amount due under this contract, Party B has the right to
withdraw corresponding RMB or other currency with equal value from Party A’s
bank account in China Construction Bank system without prior notice to Party
A.
Party A has the obligation to help Party B with the foreign exchange procedure
if there is such a need. Party A shall bear all the risks of currency exchange
rate fluctuations.
9.
Dispute Resolution
If
a
dispute arises under this contract, the parties hereto shall resolve the dispute
through negotiation. The following procedure shall be adopted if the negotiation
fails:
To
file a
lawsuit in court with jurisdiction over Party B.
10.
Precondition to the effectiveness of this contract
The
contract shall be effective once executed and sealed by both parties or their
representatives.
11.
This
contract has five copies.
12.
Other
agreed matters
i)
The
lien under this contract is covered by the Maximum Collateral Contract with
contract number: ZGEBZ2007186.
ii)
The
lien under this contract is covered by the Maximum Collateral Contract with
contract number: ZGEBZ2008045.
Clause
11 Declarations
1.
Party
A is fully aware of Party B’s scope of business and limits of
authority.
2.
Party
A has read all the clauses under this contract. As required by Party A, Party
B
has already explained the corresponding clauses of this contract. Party A has
fully understood the meaning of the contract and its corresponding legal
consequences.
3.
Party
A’s execution and performance of this contract comply with all laws,
regulations, Party A’s charter and internal organizational document, and is
approved by Party A’s internal authority and/or government
authority.
Party
A:
Seal
Signature
by Legal Person or Authorized Representative: Xxx, XxxxXxx
Date:
April 30, 2008
Party
B:
Seal
Signature
by Legal Person or Authorized Representative: ________ (illegible)
Date:
April 30 ,2008
